Brazil’s Oi, Petrobras in focus; ADCB cancels issuance; Asian sovereigns firm; Ghana ahead

By Christine Van Dusen

Atlanta, Sept. 22 – Brazilian corporates remained in focus on Tuesday – after names like Oi SA took a big hit in the previous day’s trading – amid ongoing weakness in commodities and concerns about China's declining economy.

Oi saw its bonds fall as much as 15 points on Monday on news that the company hired an adviser to restructure its debt. But on Tuesday, after Oi denied that it planned to restructure, the bonds recovered some.

In a statement, the company said it hired NM Rothschild & Sons (Brasil) Ltd. to “carry out an assessment” that would extend maturities and improve the company’s debt profile while optimizing the resources derived from the sale of PT Portugal SGPS SA.

Brazil's Petroleo Brasileiro SA was in the news on Tuesday after closing on the first asset sale from its $58 billion divestment plan, designed to chip away at the company’s enormous debt.

Petrobras is selling its natural gas distribution firms, a trader said.

In the secondary market, the company’s 6Ľ% notes due 2024 were seen Tuesday at about 72 – versus a level of 95 bid at the beginning of August, a trader said.

“Petrobras is getting killed,” another trader said. “Petrobras continues to see no Street support, and we've turned once again to better selling from accounts.”

Latin American sovereigns were also weak, with Brazil's bonds widening at least 25 basis points across the curve, another trader said.

Only the sovereign’s 2017s were getting a decent bid on Tuesday morning, he said, and sellers greatly outpaced buyers.

Lat-Am sovereigns mixed

Away from Brazil, Latin American sovereigns were “a mixed bag,” a trader said, pointing out that Chile was an outperformer.

Banks from Mexico “continue to hold in OK, trading off their lows,” he said.

Investors were keeping an eye on the new issue of notes from Colombia. The sovereign printed $1.5 billion 4˝% notes due Jan. 26, 2026 at 98.762 to yield 4.653%, or Treasuries plus 245 bps, on Monday.

BofA Merrill Lynch and Credit Suisse were the bookrunners for the Securities and Exchange Commission-registered deal, which was talked at a spread in the 262.5 bps area.

The new notes were trading on Tuesday about 15 bps wider from reoffer while the rest of the sovereign's curve was as much as 30 bps wider, a trader said.

Many Asian bonds improve

From Asia, Chinese corporates traded a little bit better during the morning, with buyers seen for Cnooc Ltd., a London-based trader said.

“High yield also felt well supported, with China property trading 1/8-point to 1/4-point better on the day,” he said.

Among sovereigns, Indonesia caught a bid on Tuesday after the markets bounced off overnight lows, he said.

“Sovereigns were generally firm,” he said. “But the Philippines long end remained a bit heavy. China, Korea and India were firm, in general, with buyers on the short end of oil, tech and banks.”

Ukraine strengthens

Looking to Ukraine, sovereign bonds have been a bit stronger so far this week. But trading has been very light, said Fyodor Bagnenko, a fixed income trader with Dragon Capital.

“Not many buyers willing to pay up, and very little supply floating around,” he said. “Volumes decreased substantially.”

Ghana deal ahead

Ghana's upcoming offering of up to $1.5 billion of notes received some attention on Tuesday, following word that the deal is likely to get a partial guarantee from the World Bank's International Development Association.

“Cash flows and principal can be paid from the guarantee up to the $400 million limit,” a trader said. “This deal could be very interesting, as different investors will have different views – perfect scenario for some two-way flow.”

The proceeds will be used to refinance domestic and external debt and for general budgetary purposes.

ADCB shelves deal

In deal-related news, Abu Dhabi Commercial Bank PJSC canceled plans for an issue of notes due in six years, a market source said.

The deal was announced on Monday and later pulled as a result of softness in the market and liquidity concerns.

Barclays, BofA Merrill Lynch, ING and JPMorgan were leading the Regulation S transaction. The notes were to be issued via ADCB Finance (Cayman) Ltd.

“All a bit strange really – they announced a deal in the morning, a good 35 bps north of where their March 2020 dollar notes last traded in the week of Eid holidays in the region,” a trader said.

On Tuesday the existing 2020s traded at z-spread plus 127 bps and “the rest of the curve was marked a little defensively,” he said.

Paul H. Harris contributed to this article

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